WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: US inventories increased by in March the highest in nine months adding to a flurry of data released over the last couple of weeks suggesting an upward revision to Q1 GDP from 0.5%QoQ annualized initially reported. Separately, US retail sales rose by in April, the largest since March 2015, while UM consumer sentiment index improved in May to the highest since June 2015 supporting market optimism for a rebound in US economic activity in Q2. Focus this week is on US inflation data and the Fed minutes while the ECB is scheduled to release the account of the monetary policy meeting held on 21 April.
GREECE: Conditional on the timely approval by the Hellenic Parliament of a multi-bill containing the legislation for the implementation of the remaining prior actions attached to the 1st programme review, the May 24th Eurogroup is reportedly expected to give the green light for the release of the next loan tranche to Greece. With respect to debt relief, a final agreement on the issue is reportedly unlikely to be reached at next week’s Eurogroup. European Commission Vice President Valdis Dombrovskis was quoted saying that the aim at the upcoming Eurogroup is for European creditors and the IMF to agree on a specified debt “road map” so as to ensure the Fund’s financial participation in the program.
SOUTH EASTERN EUROPE
BULGARIA: Largely lacking direction, the domestic equity market closed lower last week. Meanwhile local and external government bonds were little changed on a weekly basis. All eyes now turn towards the next treasury auction, set for May 16th for BGN 100mn in 10-year benchmark bonds.
ROMANIA: The EUR/RON closed little changed at 4.5000 on a weekly basis on Friday, having pulled back from a weekly low of 4.3855 hit on Tuesday. Elsewhere, the RON money market remained very liquid, with short-term rates still stuck close to the deposit facility rate of 0.25%. RON government bonds maintained a better bid tone as the market received support from lower than expected inflation data and a large downward revision in the central bank’s inflation forecasts.
SERBIA: In the absence of any major news/data, the EUR/RSD remained bound within a tight range of 122.55/75 – 122.75/95 last week.
CESEE MARKETS: Vindicating our and market expectations, most Q1-2016 flash GDP estimates released last week in the CESEE region, confirmed a good start in the year and serve as a reminder that there are few winner economies in the EM space.
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